Medical practice ownership can be an exciting, but challenging step in a physician’s career.
Buying a medical practice will give you a running start to ownership, but there is plenty of work to be done in the months leading up to your acquisition. If you are ready to take the next step in your career by buying an existing medical practice, this step-by-step guide can help you understand what to expect throughout the process.
Step 1: Build your team
Bringing together a team is essential to a successful medical practice acquisition. This team will help you review the cash flow, clinical make-up, operations and more to help you find and secure the perfect medical practice.
To ensure a smooth transition, we recommend the following professionals:
- Your practice lender and banking partner will provide financing and guidance throughout the acquisition.
- An attorney will negotiate terms of your acquisition and review your lease and any other contracts.
- An accountant will prepare you from a tax perspective and help assess the financial health of the practice. They may also support you with bookkeeping post-transition.
- An insurance broker can help you set up all business insurances needed to keep your practice protected. They also may support any personal insurances needed such as life and disability.
- An IT provider can assess the practice’s current technology and determine what needs to be updated (if necessary). They can also help you ensure HIPAA compliance and cybersecurity and get your practice set up for operation.
Other professionals that could add value depending on your circumstances are:
- Commercial real estate brokers
- Consultants (marketing, practice management, credentialing, etc.)
- Mentor
- Equipment and supplies vendor
We recommend choosing professionals that have experience with healthcare acquisitions to share their industry-specific expertise throughout the process of buying a medical practice.
Get connected to industry-specific experts for free through Build Your Team.
Step 2: Prepare personal financials & budgets
Your chosen, experienced CPA can help you assess your current financial situation and how it will affect your practice acquisition. They can help:
- Analyze your expenses and debts to determine how much you will need to earn from your practice
- Review your personal financial statement for assets and liabilities
- Help you with any credit related issues
Having a clear picture of these metrics will help you determine what practice size to look for.
Step 3: Find your desired practice
Once you have assembled your team and determined your financial needs and abilities, it is time to find the practice you will purchase. Identify your ideal location(s), network with transition professionals, and tour practices in your chosen area.
With the help of your experienced team, review patient demographics, financial statements, staffing and other necessary aspects to ensure the viability of each option.
Once you pick the practice that works for you personally and professionally, submit a letter of intent to signify your plans to buy the practice. Work with your team to conduct final due diligence, examining financial and clinical aspects of the business. Take time to evaluate the practice as a whole to determine what will need to be updated.
Step 4: Create your legal business
The purchase is now complete, so it is time to make the business your own. One of the first aspects of this is creating the legal structure of your practice.
This includes applying for tax and employment identification numbers and creating business-specific banking. This ensures you have personal legal protection. Your CPA and attorney play the largest role in helping you select this structure.
Step 5: Secure a facility or real estate
During the due diligence process, determine how you will secure the facility and/or real estate. If the seller is leasing, plan to assume the lease and learn what the cost and terms are. A good rule of thumb is if there is less than five years left on the existing lease, negotiate a lease extension during the purchase.
If the seller chooses to sell the property, work with a commercial real estate advisor and your attorney to carry out that process.
Step 6: Obtain insurance
Insurance is essential to protecting you and your practice from potential liability lawsuits and loss of use of equipment. An insurance consultant can assist you in choosing practice insurance plans.
We would encourage you to consider obtaining property, workers’ compensation, disability, overhead, liability, and malpractice insurance policies.
Step 7: Credential with insurance companies
Your practice will not be able to function properly and efficiently without being able to work with your new patients’ insurance companies.
Insurance credentialing is a critical aspect of preparing your practice for transition. This multi-step process involves deciding which insurance companies to enroll with, completing provider applications, and negotiating fees.
A consultant can help with this potentially complicated process. This process will vary state by state and according to the insurances the practice currently accepts.
Step 8: Set up business banking, credit card processing and other business operation services
In the month before your transition to ownership, collaborate with your lender and bank to streamline business operations for the practice. This includes establishing bank accounts, payment methods for vendors, deposit procedures, credit card processing, and financial management systems.
Being prepared allows you to work with patients and staff from day one as opposed to taking time out of your day to set up these services.
Step 9: Finalize transition
In the final stage of your transition to practice owner, execute and sign a purchase agreement with allocation of purchase price, contingencies, warranties and representations, and incorporation. This will also include lease negotiation or real estate purchase.
Additionally, you will want to make decisions about how the practice will change and begin integrating yourself into the practice. This begins with being introduced to the staff, hiring additional staff if needed, and updating the team handbook and/or policies.
Work with your equipment representative, supplier, and marketing experts to make final decisions about what (if any) changes need to be made. We recommend co-treating with the seller for a period of time if allowed. This will also allow you to build relationships with the current staff members to smooth the transition.
Congratulations, you now own a medical practice!
You are now a medical practice owner! We want to note that this is simply a guideline for the process, and each acquisition process is different. This is why we recommend surrounding yourself with an experienced team that can advise your unique situation.
If finances are the thing holding you back from pursuing practice ownership, doctor-specific financing can help you achieve your goals. We at Panacea Financial are excited for this next step in your career, and we look forward to the day you step into your own medical practice.
